When displaying the prices of goods and services, businesses are required to show the total minimum price. This may be inconvenient for cafés, which often charge consumer different prices on Sundays and public holidays. But, if you run a café – rest assured! This article explains that the total minimum price rule does not apply in your situation.
Component pricing and total minimum price
First let’s discuss the basic requirement for displaying a total minimum price. This requirement is found in the Australian Consumer Law (ACL), which is a national code that contains important protections for consumers and obligations for businesses.
Prices for goods and services often have various elements. In addition to the main price, there may be a booking fee, taxes, an installation fee and other costs. These costs may be referred to as component prices. Section 48 of the ACL prohibits a business from making a representation about a component price, unless the business also specifies the total minimum price for the goods or services.
The total minimum price must be displayed as a single figure and in a prominent way. The total minimum price will not be considered prominent unless it is at least as prominent as the most prominent component price displayed by the business. Taxes that are passed on to the consumer, such as GST, must be included in the total minimum price. By contrast, businesses are generally not required to include postage costs in the total minimum price.
As an example, consider a business that leases audio equipment for events. The equipment costs $250 per day to rent, but there is a three-day minimum rental period. If the business displays the daily price, it will also be expected to show the $750 minimum cost for three days at least as prominently.
The total minimum price rule does not apply to price representations made exclusively from one business to another.
Learn from the mistakes of others
In early 2015, the Australian Competition and Consumer Commission (ACCC) announced that it had issued infringement notices to an internet service provider. The ISP had run advertisements that displayed a monthly price of $69.95. Although the ads also included a total minimum price in fine print, the ACCC did not consider that this was displayed in a sufficiently prominent way. The ISP was required to pay penalties of $204,000. Rod Sims, the chairman of the ACCC, said that “prominence means that the total minimum price can be easily seen and strikes the attention of the consumer.”
Does this apply to cafés and restaurants?
If you manage a café, you’re probably feeling a bit worried at this stage. For those of you who have never worked in hospitality (or never been out to brunch on New Year’s Day), many cafés and restaurants add a surcharge to menu prices on public holidays. Complying with the total minimum price rule would mean printing different menus, which could be expensive and confusing.
Fortunately, there is an exception for cafés and restaurants. A menu is not required to display the total minimum price for food or beverages supplied by a café or restaurant, provided that the menu:
- displays a surcharge for food or beverage on specified days; and
- includes the words “a surcharge of [percentage] applies on [the specified day or days]” in a way that is transparent and prominent.
Importantly, this exception does not apply in other contexts. So, if a café or restaurant advertises on television, the advertisement must comply with the total minimum price rule.
If you manage a café, you will be relieved to learn that you don’t need to pay for new menus to be printed. There are lots of other ways that a lawyer can help your business, such as reviewing your lease or discussing the options for franchising your restaurant. At LegalVision, we have great experience helping cafés and other small businesses, so call us at 1300 544 755.